New NC Bill Proposes Tax Breaks for Tips, Overtime, and Bonuses
House Bill 11 (H11), currently under review by the House Rules, Calendar, and Operations Committee, aims to eliminate state income taxes on certain earnings
Holly Springs, NC, Feb. 5, 2025 — A proposed North Carolina General Assembly bill could bring significant tax relief to workers who earn tips, overtime pay, and performance bonuses. House Bill 11 (link), titled "No Tax on Tips, Overtime, Bonus Pay," was introduced on January 29, 2025, by Representatives Warren, Bell, Chesser, and Paré as primary sponsors.
The bill, currently under review by the House Rules, Calendar, and Operations Committee, aims to eliminate state income taxes on certain earnings, allowing more take-home pay for workers in industries where these types of income are common.
Who Benefits from H11?
If passed, the bill would allow North Carolinians to deduct specific types of earnings from their state taxable income, including:
Overtime Pay: Any money earned from working overtime, as defined by federal labor laws, would no longer be subject to state taxation. Both spouses in a married couple filing jointly can claim this deduction separately.
Bonus Pay: Employees who receive cash bonuses for exceptional work can deduct up to $2,500 from their taxable income. This applies to performance-based cash awards but does not include tips.
Tax-Free Tips: Workers in service industries, such as bartenders, waitstaff, and hospitality employees, who report tips to their employer will no longer be required to pay state income tax on those earnings.
To qualify, workers must submit the required documentation to the North Carolina Department of Revenue.
Potential Impact on NC Workers
Supporters argue that H11 will provide much-needed financial relief to hourly workers, service industry employees, and those earning extra through overtime. By exempting these earnings from state taxation, the bill aims to boost household incomes and support economic stability in North Carolina.
Critics, however, raise concerns about potential revenue losses for the state budget, particularly in areas reliant on income tax to fund public services such as education and infrastructure.
What’s Next for H11?
January 30, 2025 – The bill was referred to the House Rules, Calendar, and Operations Committee for initial review.
Next Steps – If approved, H11 will move to the Finance Committee for further debate before heading to the full House for a vote.
If passed, the bill would take effect for taxable years beginning on or after January 1, 2025.
No tax on tips is good if they aren’t earning more than $15.00/hr including the minimum wage plus tips. If they are making more that amount over should be taxed just like everyone else.